I Follow-up on Management Reform of Public Cargo Working Areas (PCWAs)

(LegCo Paper No. CB(1) 1531/95-96)

At the invitation of the Chairman, Mr Ian Dale advised that the proposed management reform of the PCWAs was to provide a fair and equitable system for the allocation of berthing spaces. The Administration was aware of the operators concerns and was having discussion with the operators with a view to arriving at an arrangement acceptable to both sides. Mr Dale stressed that the Administration was prepared to consider any counter proposals provided that the allocation of berths would be done through an open, economically viable and competitive bidding process. In response to a question raised by a member at the previous meeting about the Administrations view on restricting bidding within each PCWA, Mr Dale said that such arrangement would not be open and fair and the tender would easily be manipulated. He stressed that there must be some berths available for open tender, and cross boundary bidding.

Tenders arrangements

2. In response to members enquiries on the eligibility for participation in the restricted tenders, Mr Dale advised that the Marine Department had maintained a list of cargo operators in PCWAs based on the following records:

berthing certificates issued to operators in PCWAs;

certificates issued to operators approving the use of cranes to load and unload cargoes in PCWAs; and

offices maintained by operators in PCWAs for their cargo handling business.

3. It was the Administrations intention to recognise those operators who had regularly worked at the berths of the same PCWAs for six months in a defined one-year period as "existing operators". All such operators would be eligible to participate in the restricted tenders. According to estimate, there was a total of 201 existing operators, of whom 36 were occupying more than one berth and 16 using the fast working berths regularly.

4. Some members were concerned that those operators who had been renting berths from the habitual occupiers might be deprived of the opportunity to take part in the tender exercise. In response, Mr Raymond TANG advised while those users who had not used their own barges or cranes for cargo handling, or had not maintained an office in any PCWAs were not regarded as existing operators, those who had only engaged in subletting berths but had not taken part in actual cargo handling operation would not be eligible as well. Genuine cargo operators would be recognised under the previously mentioned criteria.

5. As regards the eligibility of those operators who had been sharing the same berth over the defined 12-month period, Mr TANG said that out of the 177 berths in PCWAs, 51 were being shared by two or more operators. The Marine Department had considered two possible arrangements for dealing with this situation. One arrangement was for the operators concerned to make a bid jointly for one berth. If the operators chose to make their bids individually, then only the operator offering the highest tender price would get the lease for the berth. The Administration would further discuss with the operators to sort out an agreeable arrangement in this regard. The Chairman suggested that all these operators be allowed to make their bids individually. Those who were not successful should then be allowed to arrange a joint venture or a subletting agreement with the successful ones.

6. As to whether existing operators would be forced out of business under the proposed system, Mr Dale and Mr TANG explained that the proposal in phase 1 was to allocate all berthing spaces in PCWAs other than the fast working berths to existing operators of those berths through restricted tenders. The existing operators would only be allocated at most the same number of berths they were occupying at present. Hence, none of the existing operators would be left without a berth, provided they were willing to pay a reasonable price. It was possible that some operators would not be able to get the berth(s) they wanted most. It would then be up to these operators to decide if they would bid for other berths or end their business. The cargo handling business was basically a mobile business. The fact that an operator had to move his operation to another PCWA should have no direct effect on his ability to carry on his business, though some extra cost for transportation might be incurred. Given that the tenders would be restricted to the existing operators only, the price an operator had to offer for the berth(s) he preferred should not be exorbitant.

7. On the suggestion of conducting the restricted tenders on a regional basis so as to enable the operators to maintain their trade links, Mr Dale said that if the berthing spaces of each PCWA were to be tendered for by only the existing operators in the same PCWA, it would easily give rise to collusion. This extent of regionalization would allow little competition and thus was not disposed to an open and equitable system. Hence, in the first phase of the reform, there must be a certain degree of cross-district competition among operators built into the restricted tenders. He further advised that the Administration was prepared to accept some form of regionalisation, but had yet to work out an appropriate arrangement in consultation with the operators. The Administration would report the outcome to the Panel. A member asked the Administration to refer to the experience of the Municipal Councils which had also adopted regionalised tendering systems for leasing the retail vegetables market stalls.

Admin

8. As to whether a reserve price would be fixed for each restricted tender to deter manipulation of the tender prices by existing operators, Mr Dale acknowledged that there was a possibility of collusion among operators. However, the more open the tendering system was, the less it would be susceptible to manipulation. The Administration was currently working on the reserve prices and Members would be advised in due course.

AdminAdmin

9. From the perspective of corruption prevention, Ms Jean AU-YEUNG said that the ICAC would prefer a cross-district tendering system to a very restrictive tendering system where operators could only bid for the berths of the PCWA in which they had been operating, as the latter system was more susceptible to manipulation by operators. Mr A R Clark added that the Administration together with the Police and the ICAC, was trying to put in place a system to prevent manipulation of tenders in different contexts. As for the tendering exercise for the berthing spaces in PCWAs, the Administration would review the system after the implementation of Phase I.

10. Mr SIN Chung-kai said that the Democratic Party was in favour of a lenient and flexible approach in determining the eligibility for participation in the restricted tenders. Operators who were able to produce adequate evidence to prove that they had been genuinely engaged in the cargo handling business in PCWAs should be allowed to participate. They also support measures to enable existing operators to continue their business in the first phase of the reform, such as a regionalised tendering system.

Possibility of monopoly by large consortia

11. Members also expressed concern about the possibility of berthing spaces being monopolised by big consortia through buying up the existing operators after the tendering process, and enquired if any mechanism would be put in place to maintain a competitive environment in the bidding of PCWAs. Mr Dale replied that while the Administration had not yet considered any such mechanism, it might not be appropriate for the Administration to interfere in any legitimate commercial deals between operators and other companies. In this respect, a member suggested that some conditions could be included in the lease to prohibit operators from changing the ownership of their companies after the offer of the lease.

12. As for the arrangement for new comers, Mr Dale said that new comers could negotiate with the lessees for subletting on a legal and commercial basis. There should be no problem for the new comers to obtain a reasonable deal as there would be some degree of competition among berth owners in the subletting business.

Criminality in PCWAs

13. Referring to the reports on the problem of criminality in PCWAs, a member asked whether the extortions were coming from elements outside the trade or within the trade which required different handling. He considered the proposed tendering system not effective enough to address bad elements coming from outside the trade. The best long-term solution was to increase the number of PCWAs.

14. In this respect, Mr Dale said that while the proposed tendering system itself might not solve the problem completely, it would reduce the opportunities for criminal elements to derive illegal profits through extortions. Successful bidders in the tenders would have legal title to the berthing spaces under a three-year lease. Their subletting of berthing spaces would then be a legal and normal commercial activity.

15. On the extent of criminality in PCWAs, Mr M W Horner informed that there was no evidence of widespread triad activities in PCWAs, though there were plenty of anecdotal evidence of extortions for years. In recent years, there had been two reported cases resulted in convictions. The first occurred in the Tuen Mun PCWA in 1992 where barge owners reported to the Police that they were subject to extortions. Polices inquiry into the case showed that there had been extortions in the PCWA for years. The second case was reported to the Police in 1994, where a premium was extorted from transportation companies for every box of goods to be loaded onto barges in the Wan Chai and Tokwawan PCWAs.

16. Mr Horner further advised that the Police took action when extortions were reported. The Police was of the view that the existing system was susceptible to monopolisation of berthing spaces backed by strong-arm tactics, and supported the Marine Departments proposed reform which would reduce the opportunities for extortions.

Future planning

17. Regarding further changes in the management of PCWAs following the first phase of the reform, Mr KWAN Wing-wah advised that the general direction of the management reform was to move towards allocating all berthing spaces in PCWAs by open tenders. Mr Dale explained that the reform proposal comprised three phases. In the first phase, berthing spaces were to be allocated by a combination of restricted and open tenders. In the second phase, the amount of berthing spaces allocated by open tenders would be increased and in the third phase, management of land operations and berths in PCWAs would be commercialised. Some members opined that the Administration should make known to the operators the details of the second and third phases of the reform as soon as possible. They remarked that operators were particularly concerned about the reform regarding the management of land operations as the Administration so far had only disclosed meagre information in this respect. Mr Dale responded that the Administration would review the situation shortly after the implementation of the first phase before going on to implement the following phases. It was possible that the reform of land operations would be brought forward if warranted by the circumstances.

18. After discussion, members expressed support to the Administrations proposal to reform the management of PCWAs. Mr Dale agreed to take into consideration the concerns raised by members when the Administration discussed the detailed reform proposal with the operations.

Admin

Post Office Trading Fund Progress Report

(LegCo Papers Nos. CB(1) 1526/95-96 and 1601/95-96)

19. Mr Robert Footman gave a presentation on the Post Office Trading Fund (POTF) as outlined in the presentation materials tabled at the meeting.

20. On the indication that some major services, including local and surface mail, would continue to operate at a loss within the years of projection, i.e. up to 1999/2000, Mr Footman advised that from the Post Offices point of view, sustaining the loss for these services was a strategic weakness. The long-term objective was to reduce the loss-making services and to price these services at cost, but the Post Office was yet to determine the pace of achieving this objective. He confirmed that at present about 90% of local mail were business mail. He took note of a members opinion that there was no good reason to sustain the subsidy to commercial letters.

21. With respect to the hybrid mail service planned to be implemented by the Post Office in 1996/97, Mr Footman explained that the service targeted on companies and Government departments which often sent large quantities of letters in standard format. With the hybrid mail service, companies could have the printing, addressing and mailing of the letters all done by the Post Office simply by sending the relevant data electronically to the Post Office. The economies of scale and the streamlined processes would ensure faster mailing at a lower cost. Besides, the data network of the Post Office could also be linked to overseas systems to enable speedy mailing across countries.

22. It was shown in Annex 2 of the information paper that the projected annual increase in the staff establishment from 1996/97 to 2000/01 was about 200 to 230. Members queried if this projected growth in staff establishment could be justified by the projected increase in postal traffic and how the target rate of productivity gains had been taken into perspective. In response, Mr Footman said that most of the anticipated new posts were postman positions for serving new routes arising from demographic changes. The projection of staff establishment had in fact taken into account the target productivity gains and projected postal traffic. However, he acknowledged that the Post Office was yet to set out more concretely how productivity targets were to be achieved. At the request of members, Mr Footman agreed to provide more information on how the projected growth in staff establishment could be justified by the projected postal traffic and target productivity gains.

23. A member expressed concern about whether there had been any improvement in productivity since the establishment of the POTF. He also noted that the projected index on inflation adjusted cost per evaluated posted item was rising through the years from 1995/96 to 2000/01, which appeared to be in contrary to what should be expected. Mr Footman undertook to further explain the projection and to delineate the measures introduced to improve productivity.

24. The Administration also agreed to provide the following information:

a written response to the questions raised by Mr LI Wah-ming which had been forwarded to the Administration before the meeting; and

information on the estimated contributions of the parcel service and post office boxes rental to the revenue of POTF in 1996/97.

Upgrading of the Yuen Long Permanent Wholesale Market to a category A project under the Public Works Programme

(LegCo Paper No. CB(1) 1526 & 1528/95-96)

25. The Chairman informed the meeting that the issue was brought up by members of the Yuen Long District Board during its meetings with LegCo Members in November 1994 and April 1996. The Panel was requested to follow up the issue with the Administration by LegCo members present at the meeting in April 1996.

Meeting with members of the Yuen Long District Board

26. Members of the Yuen Long District Board (YLDB) made the following points:

The on-street vegetable wholesaling assembly market scattered along Kin Tak Street, Hop Choi Street and Hop Yick Road in Yuen Long Town was of a very large scale and was most active from 2 am to 6 am each day;

The assembly created noise nuisances, obstructed road traffic including ambulances and a lot of waste was left behind after the assembly everyday. As the location of the assembly was surrounded by residential developments, the nuisances caused by the assembly market had all along been a serious concern of YLDB;

In an information paper provided to the YLDB in 1992, the Administration had advised that the site in Area 12 Yuen Long Town East would be handed over to the Agriculture and Fisheries Department in 1996. The Territory Development Department (TDD) has just started the land resumption exercise which would take two years to complete. It was doubtful if the land resumption exercise would take so long as a major proportion of the site had already been left idle.

Before the completion of the new wholesale market, there should be some expedient measures to reduce the nuisances caused to residents. Despite repeated requests by YLDB, neither the Police nor the Regional Services Department had taken any action to reduce the nuisances.

Meeting with the Administration

27. Mr M K CHEUNG briefed members on the programme schedule of the Yuen Long Temporary Wholesale Market which was planned to replace the present on-street vegetable wholesaling assembly market in Yuen Long Town. Mr KWAN said that the Administration agreed with YLDB that the present location of the assembly was very unsuitable and thus should be replaced by a new market as soon as possible.

28. On whether the timeframe for the programme could be shortened, Mr CHEUNG advised that the present timeframe was already the shortest one feasible. He explained that site formation and construction works could only commence after the completion of land resumption. The land resumption procedures started in February 1996 and were programmed for completion in early 1998. The Administration would then put up a funding proposal for inclusion of the project in Category A of the Public Works Programme (PWP) to the Public Works Subcommittee and then to the Finance Committee. In planning the project, the Administration had already taken heed of the suggestion of YLDB to first construct a simple structured vegetable wholesale market so as to expedite the construction process.

29. Regarding members concern about whether the project could be completed on schedule, Mr CHEUNG advised that as the project was less complicated, major problems leading to delays were not anticipated.

30. Regarding interim measures to reduce the nuisances caused by the present assembly to nearby residents, a member noted that in the case of the Yau Ma Tei Fruit Market, the District Office concerned had been quite successful in enlisting the wholesalers co-operation to reduce the nuisances caused by the trading activities in the area. The Urban Services Department also took an active part by arranging more regular street cleaning in the area. Mr KWAN advised that there was a district management committee (DMC) in each district to co-ordinate Government departments in handling problems at the district level. He understood that the Yau Tsim Mong DMC played an active part in the case referred to by the member. He undertook to draw the attention of the Yuen Long DMC to the issue of the on-street assembly market in Yuen Long Town.

Admin

31. Members noted the Administrations explanation that it was not timely to upgrade the project to Category A in PWP at the moment, because upon approval of the upgrading, the market construction works should commence immediately. For this project, the market construction works could not commence until land resumption and site formation works were completed.